Nvidia announced on Thursday that it will invest $5 billion in Intel, making it one of the beleaguered U.S. chipmaker’s largest investors and creating a new collaboration to develop future microprocessors.
Nvidia will own 4% of Intel’s new shares when they are issued. After the announcement, Intel’s stock price jumped as much as 25%.
Major Support for Intel
Intel, formally established as the leading chip company globally, has been losing traction to competitors AMD, Nvidia, and TSMC of Taiwan. The company appointed Lip-Bu Tan as CEO in March, but this was relatively short-lived as he began to face pressure from U.S. officials, including President Donald Trump, over his alleged link to China.
The U.S. government took an unprecedented move just weeks ago by investing in Intel for a 10% stake to balance the company out. Intel now has another solid investor with Nvidia joining the partnership.
Nvidia CEO Jensen Huang said the U.S. administration was not involved in the deal but would likely support it.
“This may be the first step of an acquisition or breakup of the company (Intel) among U.S. chip makers, though it is entirely possible the company will remain a shadow of its former self but will survive,” said Nancy Tengler, CEO of Laffer Tengler Investments
Chip Partnership
According to the agreement, Intel and Nvidia will partner on joint chip designs for PCs and data centers. Intel will develop custom processors that work closely with Nvidia’s popular AI chips, or GPUs. One particular Nvidia technology will enable the chips to connect faster, which is a key component to running an AI system very effectively.
For the PC marketplace, Nvidia will provide a custom graphics chip to Intel which can be integrated into the packaging of Intel’s processors. This may provide an advantage for Intel over AMD in laptops and desktops.
The agreement, though, does not include Intel’s foundry business – the segment of the company that produces chips for other companies. Nvidia also said it is still evaluating Intel’s work in foundry technology.
Effect on the Industry
The announcement surprised many in the semiconductor business. AMD stock was a bit down on Thursday, while Broadcom stock was up. Analysts also said Taiwan’s TSMC, which manufactures the leading graphics chips for Nvidia, could face risks long-term if Nvidia moves any of their manufacturing to Intel.
Future Plans
The corporations did not announce when their first collaborative products will be released. However, they did confirm that the collaboration will span “multiple generations” of upcoming chips.
With additional backing from the U.S. government, SoftBank, and now Nvidia, Intel has received new funding and new optimism for competing in the rapidly expanding AI and semiconductor industries.
“This is a massive game-changer for Intel and effectively resets its position of AI-laggard into a cog in future AI infrastructure,” said Gadjo Sevilla, senior AI analyst at eMarketer.
